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Scranton's next employee payday on Friday hinges on a loan closing on Thursday, city officials said.

Mayor Chris Doherty expressed confidence that the closing between the city and Amalgamated Bank of New York and Washington, D.C., would occur as scheduled Thursday and payroll would be made Friday.

"Everything seems to be on track" with the loan and payroll, Mr. Doherty said.

On Aug. 23, the mayor and council President Janet Evans announced the city had secured a $6.25 million tax-anticipation note loan from Amalgamated Bank, which bills itself as the largest union-owned bank in the country.

This loan would allow the city to make a full payroll on Friday, as well as pay back wages that were withheld during the July 6 payday, when the mayor - because of the city's financial crisis - slashed wages of nearly 400 employees to the federal minimum wage of $7.25 an hour.

The city's fire, police and DPW unions sued to reverse the minimum wages and a settlement between the city and unions called for the withheld wages to be paid by Friday, with 6 percent interest.

City Business Administrator Ryan McGowan and fire union President John Judge, who helped secure the Amalgamated loan, also both said they believed the loan closing and payday would occur on time.

"Our hope is that we do make payroll," Mr. McGowan said. "The scheduled (loan) closing is for Thursday. That will allow us to make payroll and then additionally the back wages that are owed, along with starting to get some money to our major vendors. That is the hope right now, as long as we don't hit any glitches with the closing."

Mr. Judge, who said he has been in contact with Amalgamated Bank officials about the closing, added, "I'm definitely confident that they (the city) will make payroll on Friday and backpay in accord with the settlement," Mr. Judge said. "It's cutting it close. This is their last chance to make it (before the Aug. 31 deadline). I don't think there's going to be a glitch. I think everything's in line and we're ready to go."

Payroll funds typically are wired by the city to a processing firm a few days before a payday, so employees receive their wages on that payday, officials have said. Asked if there is enough time to process payroll funds to make Friday's payroll with the loan closing taking place as late as only the prior day, the mayor and Mr. McGowan both said yes.

The Amalgamated loan was secured late Aug. 22 in anticipation of a revised recovery plan being adopted on Thursday. Once the recovery plan was adopted Thursday as had been expected by council, the state Department of Community and Economic Development on Friday also approved a $2.25 million aid package to the city.

Because the DCED aid, which includes a $2 million interest-free loan and a $225,000 grant, would take a few weeks to process, the city needed to obtain the TAN from Amalgamated Bank to buy the city some time, Mr. Doherty said.

Under terms of the Amalgamated loan, the DCED aid would go directly to pay down the Amalgamated loan, which has a 5 percent interest rate and must paid back by Dec. 15. The city also agreed to forward all earned-income taxes between Sept. 1 and Dec. 15 to Amalgamated, and that bank on a daily basis will keep 60 percent of those revenues and return to the city 40 percent, until the principal is paid off. The city would draw down the 40 percent of wage taxes to use on operating expenses, such as payroll and bills, the loan terms state.

The bank also charged a 3-point (percent) origination fee, which would be adjusted downward after the bank receives the city's DCED aid package of $2.25 million, according to the Amalgamated loan terms. A 3 percent fee on the remaining $4 million principal would be $120,000.

The loan proceeds also would pay fees of city administration and council solicitors, Paul Kelly and Boyd Hughes, respectively, and the city's bond counsel/financial advisers Stevens & Lee and CaseCon Capital, as well as Amalgamated's attorney fees, the loan terms state. Amalgamated's attorney fees are not to exceed $15,000. The amount of fees for the city officials had not yet been determined, Mrs. Evans said during Thursday's council meeting.

Though billing itself as the largest union-owned bank in the nation, Amalgamated is a mid-sized by bank standards. With $4 billion in assets, Amalgamated is smaller, for example, than NBT Bancorp, parent company of Pennstar Bank. The New York City-based bank that stepped in to offer $6.25 million of stopgap financing to the struggling city of Scranton made headlines earlier in August when the Democratic National Committee moved its primary banking relationship to Amalgamated Bank, leaving banking giant Bank of America.

Amalgamated was founded by garment unions and touts itself as pioneers in offering both unsecured personal loans and free checking.

Amalgamated has 25 branch offices, most of those in New York City.

While Amalgamated is a private bank and is not required to file reports with the Securities & Exchange Commission it is still regulated and has reporting requirements. A recent Call Report filed with federal regulators shows the bank had no lending to municipalities.

Requests made through bank representatives to discuss banking trends and Amalgamated's entry into a new line of business were not returned.

Mrs. Evans had cited Mr. Judge, head of International Association of Fire Fighters Local 60, as being instrumental in referring the city to Amalgamated and helping secure the loan. Mr. Judge also has cited his involvement as being key in the transaction.

Wilson Smith, bank equities analyst with Patriot Capital Partners, said the work probably amounted to not much more than an introduction. Mr. Smith said a union-owned bank may give consideration based on a union's request, particularly if a loan may maintain union jobs. But the bank would still be expected to perform due diligence on the borrower, properly collateralize the loan and have appropriate lending terms.

Council typically adjourns during August. However, council last month scheduled meetings to be held in August to continue work on a recovery plan. During last week's council meeting, when a revised recovery plan was adopted by council, it canceled the meeting for Thursday. The next regular will be Sept. 6.

Biden visit: $2G in OT

Scranton incurred $2,126 in police overtime costs during Vice President Joe Biden's visit to the city on July 3, city Business Administrator Ryan McGowan said. Mayor Chris Doherty had said last month that the city would bill the Obama/Biden campaign for security costs associated with the vice president's visit, because it was campaign-related and not an official visit.

Mr. McGowan said he has not sent the bill to the campaign yet because he has been preoccupied with the city's ongoing financial crisis, which has included crafting a revised recovery plan and trying to secure loans and financing to keep the city afloat. Mr. McGowan said he still intends to forward the $2,125.88 police-overtime bill to the Obama/Biden campaign. Whether the campaign pays it remains to be seen.

Biden visit cost

$2K in police OT

Scranton incurred $2,126 in police overtime costs during Vice President Joe Biden's visit to the city on July 3, city Business Administrator Ryan McGowan said.

Mayor Chris Doherty had said last month that the city would bill the Obama/Biden campaign for security costs associated with the vice president's visit, because it was campaign-related and not an official visit.

Mr. Biden's visit to his boyhood hometown came during the time the mayor slashed salaries of employees, including police, to federal minimum wages of $7.25 an hour, to free up money to pay mounting unpaid bills, particularly health care insurance.

Mr. McGowan said he has not sent the bill to the campaign yet because he has been preoccupied with the city's ongoing financial crisis, which has included crafting a revised recovery plan and trying to secure loans and financing to keep the city afloat. Mr. McGowan said he still intends to forward the $2,125.88 police-overtime bill to the Obama/Biden campaign.

Whether the campaign pays it remains to be seen. Last month, the Obama/Biden campaign said in a statement, "The campaign will follow all rules and pay for the portion of travel that relates to political events, as has been true for previous incumbent presidential candidates."

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